Apple Unwraps Online Music Service, New iPods

Ending weeks of acquisition rumors, Apple Monday unveiled a pay-per-song online music service, dubbed the iTunes Music Store, as well as thinner versions of its iPod handheld MP3 player and iTunes 4, an upgrade of its digital music jukebox application.

Apple CEO Steve Jobs introduced the music service and redesigned iPods at a by-invitation-only press conference here. Over the past several weeks, industry analysts and published reports had speculated that the Cupertino-based computer maker planned to buy Universal Music Group, one of the world's biggest record companies and a subsidiary of French conglomerate Vivendi Universal. Jobs had even issued a statement saying that Apple "never made any offer to invest in or acquire a major music company," refuting earlier reports in which Vivendi board member Claude Bebear acknowledged that acquisition discussions had occurred. Bebear later denied that any talks about a potential deal had taken place.

With the iTunes Music Store, Apple took a different route by inking deals with five big music labels--BMG, EMI, Sony Music Entertainment, Universal and Warner--to make more than 200,000 songs available to users of iTunes, which runs on Macintosh computers and iPod players. The company said the store "offers groundbreaking personal-use rights" by letting users quickly search, buy and download music for 99 cents per song, without having to pay a subscription fee. In addition, users can burn songs onto an unlimited number of CDs for personal use, listen to songs on an unlimited number of iPods, play songs on up to three Mac computers and use songs in any Mac application including iTunes, iPhoto, iMovie and iDVD.

Users can search the store to find a song by title, artist or album (as well as browse songs by genre, artist and album) and listen to a free 30-second preview before buying. Songs are purchased by credit card. All songs in the iTunes Music Store--available immediately as a free download with iTunes 4--are encoded in the industry-standard AAC audio format at 128 kbps, which Apple said provides smaller files, faster downloads and near CD-quality sound that bests the audio quality of similar-size MP3 files.

The latest release of Apple's digital music application, iTunes 4 also includes enhancements such as music-sharing between Mac computers via Apple's Rendezvous technology, enabling users to legally stream music to other Macs without having to copy files from computer to another, according to Apple.

"The iTunes Music Store offers revolutionary rights to burn an unlimited number of CDs for personal use and to put music on an unlimited number of iPods for on-the-go listening," Jobs said in a statement. "Consumers don't want to be treated like criminals, and artists don't want their valuable work stolen. The iTunes Music Store offers a groundbreaking solution for both."

The third-generation of iPods, which Apple bills as lighter and thinner than two CDs, drops the 5-Gbyte version in favor of three higher-capacity models of 10 Gbytes, 15 Gbytes and 30 Gbytes, with the latter unit holding up to 7,500 songs, according to the company. New features include a "no-moving-parts" navigation wheel and all-touch, backlit buttons; customization options such as the ability to move frequently used menu items to the main menu and create an "on-the-go" playlist; and a "dock" base station (for the 15- and 30-Gbyte models only) for battery recharging and connection to a Mac or Windows PC, home stereo or powered speaker.

Apple said the new iPods for Mac and Windows are scheduled to ship May 2. The 10-Gbyte model is priced at $299, the 15-Gbyte unit at $399 and the 30-Gbyte version at $499. In June, Apple also plans to provide USB 2.0 support for Windows iPods via a free software download.

Industry observers say Apple's online music gambit represents a bold move to position the company as a provider of digital content for the emerging multimedia household, as well as to raise its overall computer market share, which in recent years has hovered at around 3 percent. Fueled by brisk sales of the iPod, Apple has championed music and other multimedia content as a key to its "digital lifestyle" mantra, which puts the PC at the center of a computing environment touching home, work and leisure activities. Going forward, Apple's online music service also could augur a kinder, gentler model for digital music retailing and distribution, observers said, noting how the computer maker's one-time "rip, mix, burn" slogan had ruffled a music industry already battling Napster and a succession of music file-sharing clones.

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